Checks pushed by online banking

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BANKS across the country have been pushing their customers to use online services to ensure smooth withdrawal of checks.

This was revealed recently by Finance Minister Iipumbu Shiimi in the National Assembly.

Shiimi previously informed the house of the ministry’s intention to discuss the complete removal of the use of checks from the country’s law books.

“The banking industry was required to educate its customers on alternative payment methods such as electronic funds transfer (EFT) and to manage any fears or concerns,” the minister said.

In the past three years, banks have introduced online services for their customers, including e-wallet, blue wallet, easy wallet, mobile banking, and banking apps.

According to the Namibian Financial Inclusiveness Survey 2017, while 67.9% (989,288) of the adult population have bank accounts, 22% (320,522) reported having a smart card account.

Bank customers were advised on June 24, 2019 that it would be the last day for customers to deposit a check as a payment instrument while June 29, 2019 was the last day for interbank clearing of a check as a payment instrument.

Shiimi explained that this decision was made because checks have proven to be a risky payment instrument, “because they are very susceptible to fraud compared to other payment instruments, namely card and EFT”, said he declared.

The volumes of checks processed between 2014 and 2018 decreased significantly by approximately 79.8%.

“Since 2004, there has been a steady decline in check volumes, such as a decrease in the number of uses,” Shiimi added.

The minister said checks are becoming an increasingly expensive and inefficient payment instrument, both operationally and infrastructure-wise.

“In this regard, the troubled check infrastructure of the automated clearing house Namclear was of concern as it had reached the end of its life cycle. Additionally, it had been extremely difficult for Namclear to source the necessary parts for the check processing system as checks became obsolete and were no longer supported by the respective vendors,” Shiimi said.

Thus, he said, the industry was not ready to invest more in the troubled infrastructure given the risks associated with the payment instrument and the low volumes encountered.

“While interim solutions had been adopted such as the purchase of additional hardware components, these did not have a long lifespan and were only expected to be operational until June 30, 2019,” he said. .

He further estimated that the cost of checks to the consumer was also significantly higher, in terms of fees charged for the instrument and transaction fees compared to EFT, card and e-money.

“The high fees experienced by consumers could be attributed to reduced check volumes, which means consumers paid higher fees per transaction.”

Speaking further on the cost of checks, the minister said that any replacement or upgrade of the infrastructure required by Namclear would lead to increased check processing costs, which would be passed on to consumer charges.

A report by the Communications Regulatory Authority of Namibia said that network coverage would be sufficient, which would further support the expansion of banking/payment services in currently affected areas.

“Exchanges have also taken place with the Ministry of Justice to obtain the necessary guidance regarding the modification of the relevant provisions in the identified national laws,” he said.

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